PetroChina shows faith in LNG http://www.afr.com/p/business/companies/petrochina_shows_faith_in_... PetroChina shows faith in LNG PUBLISHED: 13 Dec 2012 PRINT EDITION: 13 Dec 2012 PetroChina is fast becoming one of the biggest foreign backers of the Australian LNG sector. Photo: James Davies Angela Macdonald-Smith PetroChina’s second major equity investment in Australia is being regarded not only as an endorsement of the Woodside-led Browse project, but also a vote of confidence in the future of the Australian LNG sector. The state-owned oil giant’s $US1.63 billion entry into Browse LNG adds to its 50 per cent stake in the Arrow Energy coal seam gas-based venture with Royal Dutch Shell, which arose after the partners combined for a $3.5 billion cash takeover of the Queensland CSG explorer. Together with its huge position as a customer for Australian LNG, PetroChina is fast becoming one of the biggest foreign backers of the Australian LNG sector despite forecasts of plentiful shale gas arriving in Asia and China’s aim to develop its own unconventional gas resources. It is the biggest customer for the Chevron-led $US52 billion Gorgon venture and the investment is being hailed as an indication of Australia’s important role in feeding the growing energy needs of Asia. The Chinese oil major has forecast it will spend $US60 billion on global oil and gas investments as it seeks to increase overseas production to half its total output by 2020. It has singled out Australia as a target for investments, alongside central Asia, eastern Africa and Canada. The Browse deal has further cemented PetroChina’s growing international links with Royal Dutch Shell, the biggest partner in the venture after operator Woodside. PetroChina is also working with Shell in the Shell-led LNG Canada venture launched in May with the world’s biggest LNG buyer, Korea Gas Corporation, and Mitsubishi. “Shell is pretty aligned with PetroChina globally,” said Citigroup analyst Mark Greenwood. “They have been interested in this asset for some time,” he said, pointing to the preliminary agreement PetroChina signed in 2007 with Woodside to buy 2-3 million tonnes a year of LNG from Browse. That agreement lapsed at the end of 2009 but West Australian Premier Colin Barnett has insisted that Chinese oil interests remain keen on snaring a foothold in Browse LNG. The high cost of developing LNG projects in Australia has been brought to the fore with massive cost blowouts on Chevron’s Gorgon venture, on Woodside’s Pluto project, and in BG Group’s and Santos’s ventures in Queensland. 1 of 3 13/12/2012 11:43 AM PetroChina shows faith in LNG http://www.afr.com/p/business/companies/petrochina_shows_faith_in_... International oil and gas industry leaders including Shell chief Peter Voser have highlighted the rising cost to the environment in Australia and the risk that the country is becoming uncompetitive as a destination. But PetroChina’s investment in Browse, as well as the earlier $US2 billion buy-in to the project by Mitsubishi and Mitsui through their MIMI venture signals more faith among major LNG buyers in Asia about Australian gas, analysts said. “If MIMI is paying what it’s paying and PetroChina is paying what it’s paying they obviously think there is a future in Australian LNG assets, and this one is pretty high on the cost curve,” Mr Greenwood said. He said that showed the buyers were expecting LNG prices to remain firm far into the future, despite growing doubts being aired about the threat to prices in Asia from cheap shale gas from the US. The deal could also be regarded as a sign PetroChina is perhaps losing confidence in its Arrow Energy coal seam gas-based LNG venture with Shell in Queensland, said Bernstein Research analyst Neil Beveridge in Hong Kong. “For PetroChina, this deal seems expensive and would appear to indicate a lack of confidence in Arrow LNG, US LNG exports, Russian pipeline gas and domestic shale gas,” he said. “Browse is one of the most expensive undeveloped green-field LNG projects on the market. The decision by PetroChina to pay a high price for entrance to a high-cost LNG development indicates a lack of confidence in alternative supplies being available.” PetroChina has been active quite recently in adding to its coal seam gas position in Queensland, snapping up Molopo Energy’s CSG assets last month for $41 million. It is also thought to be the mystery suitor for another Queensland CSG explorer, WestSide, as part of a plan to amass enough gas resources to feed a mid-scale LNG project planned by Liquefied Natural Gas Ltd, which is backed by a PetroChina engineering affiliate. READ NEXT: BHP exits Browse project in $US1.63bn PetroChina deal BHP’s LNG sale shows Asian market robust Kloppers wants ‘more options’ for Browse LNG Tougher future for Browse LNG project Australia LNG story ‘is done’, consultant warns The Australian Financial Review Create an alert Click on the links below to create an alert and receive the latest news as it happens 2 of 3 13/12/2012 11:43 AM PetroChina shows faith in LNG http://www.afr.com/p/business/companies/petrochina_shows_faith_in_... Companies Woodside Petroleum , Arrow Energy , Molopo Energy Ltd , Westside Corporation People Colin Barnett Topics Energy & Utilities /Gas Extraction , Company News , Energy & Utilities /Oil Angela Macdonald-Smith Angela covers the energy sector from our Sydney newsroom. Stories by Angela Macdonald-Smith BHP, Exxon pump $US1bn into Longford gas plant South Australia maps out shale gas future WestSide gives mystery bidder more time BHP exits Browse project in $US1.63bn PetroChina deal 3 of 3 13/12/2012 11:43 AM.